$8 $10 Billion in the Hole

New Jersey faces a projected budget deficit of $8 billion in its next fiscal year, as well as a shortfall of more than $2 billion in its unemployment compensation fund, a report said Tuesday.

The independent Office of Legislative Services estimated the shortfall at the request of Senate Republicans — and GOP office-holders greeted the $10-billion figure with calls for a special legislative session to address state finances.
…
David Rosen, the OLS’ budget and finance officer, in April told lawmakers the state was facing the worst revenue plunge in “modern history.”

Tuesday’s estimate predicted the unemployment compensation fund’s deficit would rise from $2.2 billion to $3.5 billion over the course of fiscal year 2011.

The gloomy projection came just weeks after Corzine signed a $29 billion budget that initially faced a deficit estimated at $6 billion.

When he signed the budget, Corzine noted it was nearly $4 billion smaller than the spending plan enacted for the previous year.

New Jersey faces a projected deficit of $8 billion next fiscal year, even after cutting $4 billion of spending and raising taxes this year to close a budget gap, the nonpartisan Office of Legislative Services said.

The state would need $2.5 billion in fiscal 2011 to fully fund pension contributions and will lose $1.6 billion of federal stimulus money, David Rosen, the office’s chief budget analyst, said in a July 20 memo to Senate Minority Leader Tom Kean. It also faces $1.1 billion in expiring tax increases, Rosen said.

Rosen predicted a total of $8.8 billion in spending growth and revenue losses, which would be offset by an $800 million increase in collections from major taxes including those on sales, personal income and corporations. “This figure represents growth below normal growth rates, but would be the first year of growth following two years of decline,” he wrote.

The office’s projection comes about three weeks after Governor Jon Corzine signed a $29 billion budget for fiscal 2010, which began July 1. That plan trimmed spending the most in state history while raising taxes on cigarettes, wine, liquor and the wealthy to close a deficit of $8.8 billion.

216 Responses to $8 $10 Billion in the Hole

CIT, the 101-year-old commercial lender struggling to retire $1 billion of debt maturing next month, agreed to pay a 5 percent fee to the creditors and annual interest of at least 13 percent. On top of that, the New York-based company pledged assets worth more than five times the amount of the loan as collateral.

“The terms are egregious,” said Dwayne Moyers, the chief investment officer at Fort Worth, Texas-based SMH Capital Advisors, which oversees $1.4 billion, including more than $70 million of CIT bonds. “They ripped the faces off everyone with these terms.”

Angela Logan — she of the apple cake known ’round the world — will be able to make her mortgage payment.

The Record reported last Friday how the Teaneck actress and divorced mother of three resorted to a bake sale to save her home from foreclosure. Her goal was to sell 100 homemade “mortgage apple cakes” at $40 each.

As of Tuesday, Logan had received more than 500 orders, including one from Hong Kong. And she no longer is baking in her home.

After reading about Logan’s financial bind, the Hilton Hotel in Hasbrouck Heights invited her to bake in a corner of its kitchen. Logan spent 12 hours there Saturday, turning out more than 20 cakes using a commercial mixer and convection oven. The hotel is letting Logan use the kitchen at least through this weekend, when the first of three $2,559.94 payments to Bank of America — required as part of the modification of her mortgage — is due.
…
While Logan was chopping gala and red delicious apples and mixing batter at the Hilton on Tuesday morning, Teaneck officials were visiting her house — not to order a cake but to deliver a cease-and-desist letter.

“It’s a state law that you cannot use your house as a commercial kitchen,” said Wayne Fisher, Teaneck’s health officer.

For Logan to continue baking in her home, she would have needed a separate kitchen, a license from the township and food-handler training, Fisher said.
…
Fisher said Logan could have faced up to $1,000 in fines.

“We did not fine her,” he said. “That is not our intention. We are happy for her now, and we wish her well.”

US and international efforts to stem the recession are starting to take hold and the pace of economic decline seems to have slowed, but foreclosures and unemployment won’t peak until the second half of 2009 (H209), according to Federal Reserve chairman Ben Bernanke.

Continued measures, like a extremely low federal funds rate, will be needed to get the economy back on track, Bernanke told the House Financial Services Committee on Tuesday.

“The [Federal Open Market Committee] anticipates that economic conditions are likely to warrant maintaining the federal funds rate at exceptionally low levels for an extended period,” Bernanke said, according to prepared testimony.

The U.S. Pension Benefit Guaranty Corp. will assume the responsibility for paying pensions to 70,000 workers and retirees of Delphi Corp., the agency announced Wednesday. The agency will take on about $6.2 billion of the $7 billion in underfunded liabilities. Delphi, the nation’s largest producer of auto parts, has been in bankruptcy since 2005. Before its own bankruptcy, General Motors, which spun off Delphi in 1999, had promised to assume liability for about 47,000 hourly workers and retirees.

I actually wish NJ finances were as bad as California’s and we had a governor like Schwarznegger. That would have probably woken them up to the reality and concept of belt tightening – which every American family knows so well right now.

S&P Shoots Self and Investors in the Foot With One Week Ratings Round Trip

Ratings agency Standard & Poors has managed a stunt which to my knowledge has no precedent in the history of the dark art of ratings. It downgraded some not all that highly structured commercial mortgage bonds last week to an eyepopping degree, from AAA to BBB-, just this side of being junk.

Then they restored them to AAA this week. And the reason was not some semi-defensible “the dog ate my homework”, like someone external had given them erroneous information that got plugged into their methodology. No, they had implemented a new model, it gave garbage results, and somehow no one inside the firm noticed the massive downgrades that resulted and bothered to check to see if there might be an error in the model. No, they published and then got customer howls. Now this only involved three bonds, but this happening at all is quite an impressive feat.

“Reader Entirely Random adds a vignette to this comedy of errors:

I finally got someone from S&P on the phone… tried to explain to them that capital markets simply won’t work if bonds go from AAA to BBB and back to AAA in the space of a week, that a number of people had been forced to sell the bonds last week when they had been downgraded and had lost quite a bit of money for the experience, and that any sort of credibility S&P had hoped to re-establish would likely be destroyed as a result of what they’d done. Of course the 25 year-old analyst at S&P didn’t have anything on his script to deal with those concerns and could do nothing but refer me back to their press release. I got so frustrated I suggested they completely disregard any pretense of “official methodology” and go straight to the South Park method — i.e., cut the head off a chicken and see where it lands on the rating board. I don’t think he found it nearly as funny or cathartic as I did.”

23.Ben says:
July 22, 2009 at 12:03 am
I’ve spent hours at the lunch table arguing with people about inflationary policies for over 3 years only to hear them say “I read in the New York Times that we are in the Paradox of Thrift and prices are collapsing”. 5 minutes later, they complain about increasing prices in health care, tuition, electric bills, gasoline, and food….

Ben: anyone who is willing to quote the NYT for anything related economics and finance is disqualified from having an opinion; Krugman is one of Pol Clot’s bags of plasma….

19- Great example of the reason why the nation is screwed. Holmdel Bell Labs was home to Nobel-prize winning physicists engaging in the most cutting edge research. What to replace it? Single family homes? Consumerism at its worst. We are all Californians now.

“Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.”

“Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy … to directly support corporations to buy offshore assets.”

“Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.”

DO NOT post anything about these damn commies. I don’t want to read or hear about a damn thing they’re doing. You know their damn people are chafing under their stinking commie rule and what they really need is some damn revolution over there, but “That One” is not saying shlt about them as they repress their people, threaten Taiwan and build up their damn military prowess. They need to be stopped and stopped hard. I wouldn’t have any problem with someone going over there and encouraging their people to seek freedom and democracy.

29.BC Bob says:
July 22, 2009 at 8:25 am
Time for the fed to add 10 more lending facilities.

“Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.”

“Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy … to directly support corporations to buy offshore assets.”

“Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.”

“New Jersey reportedly has ended a program to use stainless steel subway cars on artificial reefs off the coast because the cars already in place are crumbling much faster than projected.

The Press of Atlantic City reports today that a survey of 48 New York subway cars placed at the Atlantic City reef showed that 46 were destroyed after only 7 months in the water. The cars had been expected to last for 25 to 30 years.

New Jersey had planned to use as many as 600 of the New York subways cars in the reef program, but it is being terminated after only about 100 cars have been placed on two of the state’s 15 artificial reefs, which were created to provide habitat for fish.”

40#, your every calls are so great. i believe you have made sufficient profit to get out of tarp. right? (you have been joked here you were tarped. by getting out of tarp, i mean being independent from your current employer.)

people who go into finance are people who care about making as much money as they can. that is the quality that they share. they by definition don’t care about anything else enough to give up the money that they can earn in finance.

some of them are smart; a lot of them are stupid. to the extent that some of them are the best and brightest, they are the best and brightest *who also care more about money than anything else.* not the best and brightest, without qualification.

when I did one year of law school at the UofChicago (husband was working in Chicago) I met some of the B students there. they weren’t esp. smart; one actually seemed to be retarded. in contrast, I’ve met a lot of brilliant scientists; actually I’ve never met one that wasn’t at least smart. I know that B students are not necessarily finance folks, but listening to finance folks on TV is also good evidence that many are stupid.

the role of the financial services industry is pretty much on par with that of dung beetles. we really *need* dung beetles. but not too many of them.

I’m sorry, chicagofinance, but what you do is likely not of intrinsic value to society except in small doses. I’m sure you’re smart, but that doesn’t make what you do valuable. really, a good home health aide or a good vet tech is far more value added to society than most folks in finance.

I have a friend who keeps telling me that I should work as a tax attny. and make $300 per hour. I ask him why I would want to devote the short time I have on this planet to helping rich people hold onto their money. he’s obsessed with money; owns a 1.5 million dollar house that’s paid off; has a pension, loads of investments. he’s in his late 70s and won’t last forever. but his main regret is that he wasn’t a BIG financial success. go figure.

now a qualification: of COURSE people have to support their families. if I needed to do tax law for the rich to support dependents, I would do it in a second: but I wouldn’t try to convince myself that I was thereby contributing to human happiness via my profession. if you need to support your family by doing finance, so be it. and supporting your family is of intrinsic value. and it can be that all sorts of other areas of your life are a contribution to society. but wishing that your profession had social value, doesn’t make it so. even if you’re smart.

John makes all sorts of contributions to society. he’s a devoted husband and father, his dog is from a shelter, he notices that old people need libraries to hang out in, and he keeps us happy with his stories. have you noticed that John has never, I believe, claimed that being a bond trader has intrinsic value (even though it arguably does)? he doesn’t *need* to; his life as a whole does.

kareninca 43, none of youse has value. You’re all nothing more than bit players in a tragic cosmic drama being played out for the amusement of beings higher than all of us. You’re cockroaches, all of you. You’re wildebeests, dying on the river bank. Just that you don’t know it, which makes you all such great drama.

kareninca 43, none of youse has value. You’re all nothing more than bit players in a tragic cosmic drama being played out for the amusement of beings higher than all of us. You’re c0ckroaches, all of you. You’re wildebeests, dying on the river bank. Just that you don’t know it, which makes you all such great drama.

43. “value” is very hard to quantify and each person really needs to decide where they are comfortable in the hierarchy. In fact there is always someone around who will claim you are worthless. The fact is that you really only need to make yourself happy.

kareninca I don’t know if my good father status is going to last. I am taking my girls one at a time to my pair of Jets tickets this year. After seeing the Jets lose in a half empty stadium they may be damaged for life. My 7 year old insists I buy her cotton candy and I don’t know how to break it to her the Jets don’t have cotton candy. Maybe just maybe I have enough goodwill from taking them to Mohonk on vacation they can survive one day at the Jets Game. Actually to my suprise my kids all want to be teachers or doctors. At take you kids to work day the only thing they liked about wall streer was the bull on broadway, the statue of liberty, george washingtons staute and the pizza lunch.

Continental Airlines Inc. said Tuesday that it will cut 1,700 jobs and raise bag handling and phone reservation fees as it struggles to return to profitability.

As in the past, the company hopes to coax employees to take voluntary leave to reduce layoffs, but if forced cuts must be made, workers at Newark Liberty International Airport may bear the brunt, an executive said.

“The workforce at Newark tends to be less senior, so you would expect some disproportionate impact at Newark,” Chief Operating Officer Jeff Smisek said during a news conference call.

For union employees — who include pilots, flight attendants, mechanics and dispatchers — those who have junior status will be first to be laid off. Due to the Houston based carrier’s rapid growth at Newark in recent years, many of the employees there have comparatively little time on the job.

Also, because of the Newark area’s relatively high cost of living, senior pilots tend to choose to be stationed elsewhere, said Capt. Jay Pierce, chairman of the Air Line Pilots Association unit that represents Continental pilots.

Essex 52 great advice, nothing keeps the have-nots and underachievers happier. In the bad old days, they rioted if they didn’t have the ‘things’ their betters had. Today, we tell them it’s not about ‘things’ it’s about ‘happiness’. The Brits tried opium, this is way better.

There is no job I can’t do!!! However, you may not want me doing your heart surgery with a butter knife and a lobster bib.

Essex says:
July 22, 2009 at 9:45 am
I for one know that there are jobs that I could never do simply because I am not ‘wired’ that way, not that we all cannot stretch, but common sense only takes you so far….just look at Congress.

I own some Apple too in a investment club account. It appears that what little discretionary spending is still occurring all seems to be on Apple gadgets. Did you know that Apple has almost $35 per share in cash?

WATCHUNG — An ordinance has been introduced to the Borough Council to amend the age eligibility from 62 to 55 for residents living in Villa Domenico, an adult retirement condominium development tucked behind Watchung Lake on Schmidt Circle.

Success has nothing to do with what you “do.” You have value and worth because you exist – not because of the job you report to or the fact that you stay home taking care of children or even that you were Mother Teresa. Every human being has value and worth. Period.

To laugh often and much;
To win the respect of intelligent people and the affection of children;

To earn the appreciation of honest critics and endure the betrayal of false friends;
To appreciate beauty, to find the best in others;

To leave the world a bit better,
Whether by a healthy child,
A garden patch or
A redeemed social condition;

Thats nothing, there is one in Nassau County near Roosvelt field that lowered it to 45 and over and now allows kids!

dolphinbeater says:
July 22, 2009 at 10:02 am
Villa Domenico in Watchung seeks to boost sales by lowering age requirement

WATCHUNG — An ordinance has been introduced to the Borough Council to amend the age eligibility from 62 to 55 for residents living in Villa Domenico, an adult retirement condominium development tucked behind Watchung Lake on Schmidt Circle.

43.kareninca says:
July 22, 2009 at 9:27 am
re the last thread:
people who go into finance are people who care about making as much money as they can. that is the quality that they share. they by definition don’t care about anything else enough to give up the money that they can earn in finance.

when I did one year of law school at the UofChicago (husband was working in Chicago) I met some of the B students there. they weren’t esp. smart; one actually seemed to be retarded. in contrast, I’ve met a lot of brilliant scientists; actually I’ve never met one that wasn’t at least smart. I know that B students are not necessarily finance folks, but listening to finance folks on TV is also good evidence that many are stupid.

the role of the financial services industry is pretty much on par with that of dung beetles. we really *need* dung beetles. but not too many of them.

I’m sorry, chicagofinance, but what you do is likely not of intrinsic value to society except in small doses. I’m sure you’re smart, but that doesn’t make what you do valuable. really, a good home health aide or a good vet tech is far more value added to society than most folks in finance.

karen: horrid post; not because of your opinions, but rather that you stereotype whole swaths of people based on a handful of personal experiences. Further, you cast your finger at me, when you do not know me and also have (apparently) no idea what I do for my job. If anything, it appears that you are the one that need to defend your decision to avoid “going for the gold”. It is actually really disturbing to see people so easily make broad decisions about what is good for society versus what is not, when in reality, it appears that their comments prove that they have no idea about the subject matter they are discussing.

As the prime example I can conjure: Bill Gates and Microsoft were the most disgusting examples of greed and predation in decades. However, now that he essentially vanquished the countryside and retired, he is using his monopolist wealth for tremendous charitable purposes. What is he – pig or higher order thinker? Is he a waste? Up to his 50th birthday, it appears the answer for your was clear, but now he is “acceptable”….please spare me….

Chifi, don’t waste your breath. You are a new dad and a player. No need to explain yourself. More importantly what is your take on my Ford Bonds. I bought the 7.35 of 2031 back in Feb for 20 and they are now trading for 65 with earnings due tommorrow. Do I sell today and take profit, or do you think Ford has room to run or at least hold steady to Feb of 2010 so I can sell at the lower cap gain rate.

AAPL still has some legs. They currently have a tablet in testing (over 2 years now) with Verizon wireless that will open up AAPL to 80+ million wireless subscribers. No way to say if this will be an iPod or a Newton but there is some serious coin to be made if the thing is a hit.

May House Price Index: +0.9% vs. -0.2% consensus, after falling 0.3% in April (revised). According to the FHFA’s index, nationwide prices are down 5.6% from a year earlier, and 10.7% from the April 2007 peak.

#76 – The area around Tompkins Sq. has seen an increase in thuggery lately. neithermorenorless.blogspot.com has been writing on the escalating violence against transients and homeless in the area by roving gangs of kids. Interesting, sad and worth reading. Some good photography as well, especially the early posts.
It’s only a local blog so all disclaimers apply and is probably not indicative of anything at all. Just noting it.

“now a qualification: of COURSE people have to support their families. if I needed to do tax law for the rich to support dependents, I would do it in a second: but I wouldn’t try to convince myself that I was thereby contributing to human happiness via my profession.”

Actually, I think I do contribute to human happiness. One happy, less burdened taxpayer at a time.

May House Price Index: +0.9% vs. -0.2% consensus, after falling 0.3% in April (revised). According to the FHFA’s index, nationwide prices are down 5.6% from a year earlier, and 10.7% from the April 2007 peak.

China is doing the same thing that the U.S. is. It is trying to replace consumer spending (ours through exports) with government spending. Unfortunately, the GDP numbers look good, but the underlying levels of low employment will eventually create a crisis.

Even look at our earnings. It appears that our discretionary spending has not shown any sign of recovery among the MSM green shoots. Companies are improving their earnings (slightly) through attrition. Retail sales are down almost 8% year over year and are showing absolutely no signs of recovering. There might be some green shoots on Wall Street (thanks to the Wall Street residents in DC Paulson, Geithner) but the rest of us are watching the weeds take over.

Defaults on U.S. credit cards rose to a record 10.76 percent in June and may continue to climb through the middle of next year, according to Moody’s Investors Services.

Delinquencies, a signal of future charge-offs, fell for the third straight month to 5.81 percent, the lowest this year, as measured by Moody’s Credit Card Index.

Analysts have attributed the decline to seasonal forces such as a rise in income-tax refunds, as well as consumers being more cautious and the injection of federal stimulus money into the economy.

“If delinquencies continue to improve beyond the typical seasonal pattern, then a similar trend in charge-offs may follow,” Moody’s analyst William Black said in a statement.

Charge-offs typically increase with U.S. unemployment, which rose to 9.5 percent in June, the highest since 1983. Moody’s said it expects the jobless rate to reach as much as 10.5 percent in 2010, and predicts charge-offs will peak at 12 percent to 13 percent at the same time.

I’m in investments and I consider what I do both moral, useful, and enjoyable.
Every day I’m judging companies, deciding which ones deserve the capital of investors, and which ones don’t. Using my judgement about the world economy, business and industry dynamics, investment valuation, etc. If, like the sell-siders, I didn’t do it well, then I’d hate my work. But I do, thus I make money for investors, steer capital towards its most efficient use globally, and make money myself.
Thus I make money by making the world a better place.
Though it doesn’t seem like it recently (thanks to state intervention, fiat currencies, central planning of finance via state-run central banks), finance has added value by facilitating investments in productive activities over the past centuries. I do worry that governments will increasingly hijack the financial industry to funnel savings into value-destroying activities, to “feed the beast” so to speak.

I agree. You are seeing a bit of an uptick in inventory replacement and that is about it and it’s not going to be followed by any upsurge in demand. Especially as unemployment continues to escalate.

China is putting in place a huge stock market bubble. Jim Rogers was on Bloomberg this morning saying he’s not even investing in it and he has been one of China’s biggest bulls.

The next leg down is definately going to be messy. Central Bankers have yet to show they can manage anything. They are plugging holes in the dike with their fingers and pretending it is a long term solution.

“CIT’s Holdout Problem
posted by Stephen Lubben
So today word comes that CIT’s bondholder-provided $3 billion of new financing will not solve its liquidity problems. That’s not really surprising, given that CIT has $10 billion in debt maturing through the start of next year.

The more pressing issue is $1 billion of debt that comes due next month. CIT reportedly plans to offer the holders 83.5 if they tender now, and 80 if they tender later. They want to achieve a 90% acceptance rate.

You really could not ask for a better illustration of why out-of-court exchange offers so often fail. Obviously the best place to be is among the 10% of CIT bondholders who don’t tender, because CIT will then be contractually bound to pay 100 in August. The problem being that if the 10% swells to 25% — because everyone has the same bright idea — the entire exchange offer will fail and CIT will end up in chapter 11.

And then there is the issue of those folks who take 82.5, only to find CIT in chapter 11 this winter. The other $9 billion of debt might want to have a word with them, especially if the filing comes within 90 days of the tender offer.”

Morgan Stanley Sets Aside 72% of Revenue for Employees’ Pay
Morgan Stanley set aside 72 percent of its second-quarter revenue for compensation and benefits, more than Goldman Sachs Group Inc. or JPMorgan Chase & Co., amid a “war for talent” with rivals that generate more money.

“It was a very good quarter to be a Morgan Stanley employee,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “I’m not so sure it was so good to be a Morgan Stanley shareholder.”

The average ratio of compensation to revenue at securities firms this decade has been about 48 percent, Hintz said, calling Morgan Stanley’s figure “pretty extraordinary.” Chief Executive Officer John Mack, 64, is under pressure to increase pay after Goldman Sachs set aside a record $11.4 billion for salaries, benefits and bonuses in the first half and JPMorgan Chase & Co. boosted investment-bank compensation by 37 percent.

First-half compensation expenses at Morgan Stanley, the biggest U.S. brokerage, dropped 14 percent to $5.91 billion as revenue plunged 40 percent. (See table, below.) The firm reported a second-quarter loss from continuing operations of $159 million that was bigger than analysts estimated. Goldman Sachs last week posted record earnings of $3.44 billion.

“The war for talent seems to be as hot as ever, I’m not sure that’s sustainable,” Colm Kelleher, Morgan Stanley’s chief financial officer, said in an interview today.

The number of employees rose to 62,215 at the end of June, which included 20,004 people from the company’s new Morgan Stanley Smith Barney retail brokerage joint venture with Citigroup Inc.

Repaying TARP

Morgan Stanley last month repaid $10 billion to the U.S. government plus dividends to shake off restrictions on the size of bonuses it can award.

“If it’s seen that Goldman’s the place where you’re going to get compensated, that’s obviously going to lead to some type of a talent drain at some point,” said Ben Wallace, an analyst at Grimes & Co. in Westborough, Massachusetts, which manages $750 million in assets. “Morgan Stanley’s big challenge, whether it’s compensation or risk or earnings outlooks, is going to be differentiating themselves from Goldman Sachs.”

Last year Morgan Stanley slashed compensation costs by 26 percent, including a 50 percent average reduction in bonuses for all employees except for financial advisers, as the firm’s revenue tumbled 12 percent. The firm also changed pay practices so it can recoup a portion of employees’ cash bonuses if problems arise in subsequent years.

This year, as competition for workers increased, Morgan Stanley raised base salaries for top executives to make up for a decline in bonuses.

Six Months

In the second quarter, Morgan Stanley’s compensation expense of $3.88 billion was 72 percent of the quarter’s $5.41 billion of revenue. For the first six months of the year, the firm’s $5.91 billion expense was 71 percent of the $8.36 billion of revenue.

Goldman Sachs’s first-half expenses for pay were up 33 percent from a year earlier and was enough to give each worker at Goldman Sachs $386,429 for the period. Goldman set aside 49 percent of revenue in the first six months of the year for salaries, benefits and bonuses.

JPMorgan Chase & Co. set aside $6.01 billion in the first half for investment bank employees’ compensation, up 37 percent from a year earlier, even as the number of people employed at the investment bank fell 30 percent. The division’s compensation makes up 38 percent of the revenue it generated in the six-month period, down from 51 percent in the same period a year earlier.

Investment banks have traditionally awarded a large portion of employees’ compensation in the form of year-end bonuses tied to the performance of the firm and the individual. The more senior an employee, the bigger percentage of their pay typically comes in the form of the year-end bonus. Payments are often made in restricted stock that can’t be cashed out for several years.

The following table compares revenue, compensation and employee numbers at Morgan Stanley, Goldman Sachs and JPMorgan Chase’s investment bank in the first half:

“They are plugging holes in the dike with their fingers and pretending it is a long term solution.”

Yup? Where did the toxic assets go?

I really hope that by moving these toxic assets off of corporate balance sheets onto the federal government’s balance sheet that we didn’t just bankrupt our federal government. It was one thing when our government acted on behalf of it’s corporate masters in policy making over the last 1oo or so years. It’s a whole other thing when the government creates such moral hazard where all ‘risks gone bad’ are forgiven and rewarded.

reinvestor 99, they want you to riot. That’s exactly what they want you to do. That’s the necessary next step for the final chapter of this drama to play itself out. You’re about to find out just how expendable and worthless you really are.

You know what? I think you’re right. That money that Goldman Sachs and Morgan Stanley have could have been loaned to me dammit. That money could have gone to bulldoze some damn houses so my house value was stablized. Did they do that? Nooo. The damn Fed gave away free inventory and these damn people took it, sold it and made a shltload of money. Plus on top of that, the damn real estate terrorists have been allowed to run amok talking negatively.

Dammit, as I write this the more pissed off I’m getting. Watch the news tonight…burn baby burn.

100.dolphinbeater says:
July 22, 2009 at 11:59 am
reinvestor 99, they want you to riot. That’s exactly what they want you to do. That’s the necessary next step for the final chapter of this drama to play itself out. You’re about to find out just how expendable and worthless you really are

“July 22 (Bloomberg) — Wells Fargo & Co., the biggest U.S. home lender, said bad loans jumped in the second quarter as the recession made it harder for borrowers to keep up with payments. The bank dropped as much as 7.6 percent in New York trading.”

“Assets no longer collecting interest climbed 45 percent to $18.3 billion as of June 30 from the first quarter.”

reinvestor 104, the powers that be are looking for an excuse to snuff out brave voices of dissent, like yours. Don’t give them the excuse. They will go Tiananmen all up your azz if you let them. This isn’t a free country anymore, it’s run by bankers and real estate terrorists with a Kenyan president to boot.

Trouble is the auction is a efficient market that only licensed dealers can go to. As soon as they cut the price on the new model the used model at auction fall the same price. In the summer of 2005 when GM did employee pricing and cut new car costs around 5K the people who just bought the same exact model pre-employee pricing saw 5K deprecation. The other thing about the auction if you have good taste you are better off buying new. If you want some weird odd model that depreciates like crazy or some odd color better off at acution. I bought a 20 month old black station wagon with 9K miles once at auction for $11,300 while the identical ones in blue or red were $15,000. At auction a black station wagon is a tough sell as it looks like a hearse. Just like an automatic corvette or porsche goes for a lot less at auction but brand new actually costs more. The cash for clunker program makes it harder to sell late model used cars thus prices have to fall which wipes out most of savings.

make money says:
July 22, 2009 at 11:47 am
Chrysler is now doubling the $4500 cash for clunkers.

Might be a better deal then John’s idea od spending weeks at auctions to save a few grand.

New seabring is going for 16K below subtract 9K from it and you now have a brand new car for 7K.

Another credit card company cut my damn credit line, just as I was getting ready to buy some stuff.
What could you possible have been buying? Surely a rock-ribbed American like you couldn’t be wanting for something.

Dolphin, my fellow patriot, I’ve tried to hold back, really I have, but when some damn dirtbag decides to cut my credit limit again, when the stinking real estate terrorists act like vultures by insulting me with low ball offers and when liberals are running amok, then my damn freedom is being impinged upon and life ain’t worth living. I’ll be damned if I’m going to take that shlt lying down. Someone has to take a damn stand and I’m just the one to do the deed.

CREDIT LINES OR DEATH!!! Watch the news at 4:00.

108.dolphinbeater says:
July 22, 2009 at 12:15 pm
reinvestor 104, the powers that be are looking for an excuse to snuff out brave voices of dissent, like yours. Don’t give them the excuse. They will go Tiananmen all up your azz if you let them. This isn’t a free country anymore, it’s run by bankers and real estate terrorists with a Kenyan president to boot.

109.dolphinbeater says:
July 22, 2009 at 12:15 pm
reinvestor, you must live so others do not have to die in vain. Live, freedom fighter! Live to fight another day

According to the Phoenix Affluent Marketing Service, the number of millionaires as declined by 14%.

New Jersey (6.2%) – 3rd Rank
A lot of folks who live in New Jersey work in New York City, the cradle of western civilization that has Wall Street, General Electric’s main offices and the New York Stock Exchange. There’s a lot of money made there and it’s just over the river from New Jersey.

A lot of New Jersey residents work in Philadelphia as well. Those who choose to work where they live have some good options as well. Some of the most powerful companies in the nation are in New Jersey. It’s home to major pharmaceutical firms such as Johnson and Johnson Bristol-Myers Squibb, Pfizer, Merck and many more. It’s also the home to Verizon Wireless and AT&T Communications. And both Bruce Springsteen and Jon Bon Jovi are millionaires.

You want winners? You want me to put my Cramer Berkowitz hedge fund hat on and just discuss what my fund is buying today to try to make money tomorrow and the next day and the next? You want my top 10 stocks for who is going to make it in the New World? You know what? I am going to give them to you. Right here. Right now. OK. Here goes. Write them down — no handouts here!: 724 Solutions, Ariba, Digital Island, Exodus , InfoSpace.com , Inktomi ), Mercury Interactive , Sonera , VeriSign and Veritas Software.

pardon if posted, but if this comes to pass, it will be a game-changer:

“Economic cycles will never be the same, as we are going to see more turbulence and shorter periods of prosperity, John Caslione, founder and CEO of GCS Business Capital and author of “Chaotics” told CNBC Wednesday.

The old-style economic cycle, with several years of growth followed by a recession is not likely to be repeating itself because of the volatility brought on by globalization, Caslione told “Squawk Box Europe.”

“What we’re going to start to see now… is the fact that we’re going to move… to a series of Ws,” he said. “We really have entered into this, what we call, the age of turbulence.”

“What we may have is 4,5,6, 15 months of prosperity followed by a few months of downturn,” he added.

“Chaotics”, which Caslione co-authored with Philip Kotler, aims to help businesses detect sources of turbulence, price strategically, and adjust products to meet new customer needs.

“The second launch will really be when people say … where is the cycle again?” he said.

Businesses have to go back to thinking longer-term but they also have to adjust to new realities, according to Caslione.

“We’ve been pushing for short-term profitability and too short-term growth,” he said.

In the new, more turbulent environment, unemployment at 9 percent in the US, as it is now, may become the norm, compared with the previous level of around 4 percent, Caslione added.”

This affects politics dramatically, including the electoral cycles, which pols try to time to business cycles (so the can take credit for them or blame the oppo). And while I don’t have the econ. research in front of me, this strikes me as a more pronounced version of what occurred in the 70’s.

BC, you threw me off there for a minute, but you know that Indiana ain’t a football state historically, so who cares if that other school leads in the football contests. What matters is roundball and that’s where those damn boilermakers have been getting their asses kicked and that will continue to happen for the foreseeable future.

Robert Montgomery Knight was a great coach and when you lose a great coach, of course you’ll feel it. However, the storied tradition of Indiana University basketball still stands! It will always stand! When you have a hallowed storied tradition as my alma mater has, then setbacks are just temporary. Sure, we’ve had some coaching challenges in the aftermath of losing Knight, however, these will be surmounted.

re: #29 BCBob – Rumor has it China has been funding it’s foreign acquisitions using it holdings of US Treasuries as collateral for sometime now, and what is not stated in that FT article but should be noted is they aren’t buying what Wall St is selling.

Here is a quote from Gao Xiqing who runs the China Investment Corporation soverign Wealth Fund.

“If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people.”

Seem to recall hearing Perdue a lot in hoops and football. IU? Strangely absent, except for a couple of seasons ago when they had a decent prospect that couldn’t carry the whole team. And boy, was he ever full of himself. Smuggest athlete I ever saw. Whatever happened to him, whasshisname?

116, SG,
Actually Bon Jovi spends his weekends in the Hamptons. I’ve been there several weekends this summer and he’s always spotted.
Not sure if he’s there during the week too. Last summer same thing.

SEATTLE, July 21 (Reuters) – Microsoft Corp (MSFT.O) said on Tuesday it had terminated a vendor-financing deal with lender CIT Group (CIT.N), but declined to give further details.

CIT makes loans to small and medium-sized businesses to buy equipment and it faces crushing losses on bad loans. The lender is hoping to stave off bankruptcy protection with emergency financing from private investors secured on Monday.

Microsoft did not put a value on the loans CIT had issued to customers under its pact.

“Microsoft works with a number of financial institutions, including CIT, that provide vendor services and we continue to offer financing to qualified customers as a way to pay for software and services,” said Microsoft in a statement. “Microsoft Financing has contingency plans in place to protect our customers and partners needs.” (Reporting by Bill Rigby; editing by Carol Bishopric)

Disco? God help us all. I’m hoping for a resurgence of some quality Rock. It seems we can only get some good bands going when kids in their early 20s can’t find a job. This pretty much happened in our last REAL recession in the early 90s. Unfortunately, they all died of heroin overdoses and by 1995, any potential newcomers probably found jobs at that point.

Meanwhile, the extent of credit damage in Spain is becoming clearer after America’s GMAC revealed that it had been selling Spanish mortgage assets at 14.5 cents on the dollar as it withdraws from global ventures to focus on the US home market. Until now, it has been hard to measure the extent of the “haircuts” being suffered on Spanish mortgage securities since there is no obvious gauge such as the ABX Index used to track sales prices on US subprime and Alt-A debt.

I like this Gao Xiqing guy…he’s got common sense. Maybe we should get him to run for US President.

“Talk to the Chinese! Talk to the Middle Easterners! And pull your troops back! Take the troops back, demobilize many of the troops, so that you can save some money rather than spending $2 billion every day on them. And then tell your people that you need to save, and come out with a long-term, sustainable financial policy.”

wonder how that chinese stimulus is working out? electricity consumption was down about 2% YOY for the first 1/2 of the year and was up about 8% last month when temperatures were regularly around 40C, 100F. The increase of 8% was the first increase in electricity consumption for the last 7-8 months.

I am no expect, but it seems to be that a production driven economy cant be growing if electrical consumption is dropping.

My favorite Hampton moment was I was going to a fund raiser at Christina Lawford’s house and she had valet parkers letting people park on her huge driveway. Well there was one spot left and I was going for it in my old 450sl with the top down, my buddy in a newer porsche 911 with top down cuts me off and they jammed the valet rope on me and he was about to take the last spot just as he is about to go for it a new triple white rolls royce covert with top down drives around my friends porsche and takes the last spot and we end up out on the street hoping we would not get a ticket.

That is what I love about it, also I learned don’t called snoop, snoop, some dope did and he gave this whole speech that is not his name, it was something like Calvin. Later on I said Calvin how are you enjoying the party. He was like it is nice to enjoy a drink without a bodyguard without having to act all tough and worry about people shooting you. I was like Calvin I know how you feel. I think Calvin was like WTF holmes?

Ben says:
July 22, 2009 at 2:35 pm
Keeping it real in the Hamptons? John, why don’t you make a reality TV show? The entire culture of the Hamptons is based upon keeping it fake…not real.

Living it, if I was dreaming it I would have been in the triple white Rolls instead of my 1975 450sl that sported a new paint job and seat covers, but a closer look would have shown a car with 120K miles and the seatcovers hiding cracked leather seats. My Benz was a perfect ten, from ten feet away it looked great. Close up their were more runs in the paint than a tranny hooker’s fishnets.

Kids today are stupid, the closest they come to a band in air guitar on a video game. There are very few rock clubs left. I recall in the late 70’s going to Hammerheads, Dublin pub, Speaks, Rocks, Pladium, CBGB, My Fathers Place, Stone Pony and tons of clubs in NYC. Heck just go down to beaker street. I pick up village voice and there would be tons of rock clubs. Now kids just listen to an IPOD. However, I do think back to me and my brother when I was a senior in HS going out on Thursday nights till 4 am in the morning on a school night to a dollar buds rock night and driving by braile home might have not been a good idea. Remember, the last time Rock was hot from 1977 to 1984, disco was dead and modern pop, Rap and MTV did not exist. Plus bands were not primadonnas, they would play more than one club a night and thus were cheaper. I hired this kick butt band once for 3K for a frat party that normally charges 7K, the group did my set from 8pm to ten pm and then went to the real club for his 11pm booking. The negoiation involved, 3K kids, you better have someone bringing us free beer on stage and I wan the 3K in cash on way out or me and the roadies are going to be very mad. Considering they were like foour guys with long hair and tatoos with a roadie the size of a hells angels I imagined the worse.

Shiller makes a great point. When looking at the home price bubble, newer homes are bigger and so part of the huge run up in pricing is justified.

one chart that would show this is price per sq foot of a single family home. that might tell a different story than the CS index. The data for that might be impossible to find. Especially in NJ, where they dont even list sq ft.

you can argue that the quality of newer homes have gone down over the years but quality is something we probably wont be able to judge for ten or twenty years down the road. Maybe newer homes arent that badly constructed. Newer cars are made with more and more cheap and flimsy materials but most of them still hold up.

I don’t look for employment any longer, the taxpayers are paying my mortgage indefinitely. Besides, I can’t bring the laptop out by the pool. I don’t want to spill my margharita on it nor get any water on it from the splashing.

I’m shocked, shocked, to discover that there is gambling going on here.

“July 22 (Bloomberg) — At the Bank of America Corp. office in Washington, employees are fielding as many as 10 calls a day from Capitol Hill, up from about two a year ago.

Senator Charles Schumer telephoned Citigroup Inc. Chief Executive Officer Vikram Pandit to protest the withdrawal of a mall developer’s credit. Representative Elijah Cummings said American International Group Inc. should withhold bonuses. Senate and House panels summoned General Motors Corp. CEO Fritz Henderson twice in nine days to justify dealership closures.

The companies are among more than 600 that taxpayers have stakes in after the U.S. bailed out banks, carmakers and insurers. That put members of Congress in the unfamiliar role of shareholders, said Robert Solow, professor emeritus at the Massachusetts Institute of Technology in Cambridge.

“To be a major equity owner in so many corporations is not something that we’ve done before,” said Solow, a 1987 Nobel laureate for his theory on economic growth.

The result is a drain on executives’ time and energy as legislators command attention and company officers fret about actions that might arouse congressional anger, said C.R. “Rusty” Cloutier, CEO of MidSouth Bancorp Inc.

“You’re scared to do anything,” said Cloutier, whose bank holding company in Lafayette, Louisiana, took $20 million in Troubled Asset Relief Program money. “It’s gotten insane.”

Most corporations appear not to have altered business decisions in response to pressure from lawmakers, according to Charles Geisst, a finance professor at Manhattan College in Riverdale, New York, and author of a history of Wall Street.

“We’re micromanaging,” Souder said at a July 16 House Committee on Oversight and Government Reform hearing. “Congress is going to start to tell people what kind of tie they can buy if we’re not careful.”

It’s natural for elected officials to make demands on corporate officers, and the money the government lent gives lawmakers new rights, said California Representative Brad Sherman, a Democrat on the House Financial Services Committee.

“If you pay for them, you own them,” Sherman said. . . .”

Well, like we didn’t see this coming. And remind me which leader said that the government wouldn’t inject itself into the management of these companies? Hmmmm. I know it, its on the tip of my tongue . . .

Losses on loans backing 2006 securities will reach an average of about 32 percent of the original balances, while losses for similar 2007 bonds will total about 40 percent, the New York-based ratings firm said in a statement today. In February, S&P said the losses would total an average of 25 percent for 2006 bonds and 31 percent for 2007 securities.

July 22 (Bloomberg) — Goldman Sachs Group Inc.’s repayments to the government of last year’s bailout money, including an agreement today to repay warrants, generated a 23 percent annualized return for U.S. taxpayers.

Goldman Sachs agreed to the Treasury’s request for $1.1 billion to repay warrants the government received when it invested $10 billion in the New York-based firm last October. The payment is in addition to $318 million in preferred dividends.

U.S. home prices climb 0.9% in May, FHFA says
Strong gains posted in Pacific, East North Central regions

WASHINGTON (MarketWatch) — U.S. home prices rose 0.9% in May, the Federal Housing Finance Agency reported Wednesday, with strong gains in the Pacific and East North Central regions.

Home prices have dropped 5.6% in the last year, the government agency reported, and the U.S. index is now 10.7% below its peak in April 2007.

In May, prices rose in five out of nine regions and fell in four, FHFA said. Read the report.

James Lockhart, the agency’s director, said in a statement that it’s hard to draw conclusions due to the volatility of the monthly index, and revisions. Still, he noted that “the seasonally adjusted [house price index] for the first five months of this year is up 0.3% or 0.7% on an annualized basis.”

The month’s biggest gains were in the Pacific region, where prices rose 2.7%. In the East North Central region, prices climbed 1.5%.

Analysts for Goldman Sachs saw some positive news in the report.

“It is becoming clear that the pace of home price decline has slowed sharply, and it is possible that prices may be close to bottoming,” they wrote in an email.

Prices in New England took the biggest decline in the month, dropping by 2%.

April’s decline of 0.1% was revised to a drop of 0.3%.

Mortgage activity heated up for the third straight week, a separate report said Wednesday.

Mortgage applications rose a seasonally adjusted 2.8% last week from the prior week, overcoming higher interest rates charged on fixed-rate home loans, according to the Mortgage Bankers Association’s survey released Wednesday. See full story.

On Thursday, a report about existing home sales in June is due for release at 10 a.m. Eastern. Economists surveyed by MarketWatch are expecting sales of existing homes to rise to 4.85 million from 4.77 million in May. See Economic Calendar

Most every index was falling at its fastest YOY pace in the most recent data reported.

You CAN NOT COMPARE the OFHEO HPI numbers with other reported indices, only with itself. OFHEO HPI was the most understated index on the way up, and is the most understated index on the way down. Look at the black line in comparison to the others in the link above.

The latest results, for the week ended July 17, mark the third straight week of greater activity in mortgage applications. See related story.

Last week’s applications were up an unadjusted 6.6% from the same week last year. The Washington-based MBA’s survey covers about half of all applications filed for retail residential mortgages.

The volume of applications seeking to refinance existing mortgages was up 4.0% last week compared with the week before, while applications filed for loans to purchase homes also increased, up a seasonally adjusted 1.3%.

The four-week moving average for all mortgages as tracked by the MBA was down 1.0%.

Refinancings made up 55.5% of all applications last week, up from 54.9% the week before. Adjustable-rate mortgages accounted for 4.8%, down from 5.0%, the MBA said.

Rates on 30-year fixed-rate mortgages averaged 5.31% last week, up from 5.05% the week before. To obtain the rate, applicants were required to make payment of an average 1.18 points. A point is 1% of the mortgage amount, charged as prepaid interest.

Fifteen-year fixed-rate mortgages carried an average rate of 4.80% last week, up from 4.59% the week before; the mortgage required payment of an average 1.03 points.

As for one-year ARMs, rates averaged 6.50% last week, up from 6.47%; the mortgage required payment of an average 0.11 point.

You’ll drive yourself completely nuts if you are looking at the weekly purchase numbers and trying to decide whether or not they mean improvement or decline. I can’t predict the direction, but I know for sure that the thing behaves like a bad EKG.

Grim: My point is the area is down less than 20%.When other states are down 50%I understand we have less foreclosures than other states.
“The year over year change for the region was -4.3%. The YOY change accelerated from -1.4% decline in the year prior.” Would it been worst if liquidity was not flowing?

My point is the area is down less than 20%.When other states are down 50%

So what? When I said that prices would fall 30% from peak during the 2005/2006 period, I was called an idiot. Nobody could have seen this coming, right? If you are looking for 50%, you’ll be waiting a long time, because I just don’t see it. We didn’t see the kind of out of control new inventory growth that those hard hit areas saw. Wages and rents would need to fall dramatically to support that kind of decline. But hey, maybe I’m wrong. The bubbles didn’t perform the same on the way up, many areas experienced different dynamics, why should they all perform the same on the way down? Same goes for timing, who says real estate markets are synchronous?

We will have more information when the next S&P Case Shiller is released next Tuesday. But this is where we stand.

S&P Case Shiller NY Metro Commutable Area Home Price Index

Low Tier (Under $283721) – Peaked in October 2006 and is down 24.5% from peak

Mid Tier ($283721 – $416284) – Peaked in September 2006 and is down 22.42% from peak

High Tier (Over $416284) – Peaked in June 2006 and is down 17.39% from peak

Aggregate (Overall Market) – Peaked in June 2006 and is down 21.08% from peak

Condo-Only Index – Peaked in February 2006 and is down 12.85% from peak

If you are looking for 50%, you’ll be waiting a long time, because I just don’t see it. We didn’t see the kind of out of control new inventory growth that those hard hit areas saw. Wages and rents would need to fall dramatically to support that kind of decline. But hey, maybe I’m wrong

In an evening news conference, Obama is expected to outline the case for healthcare reform as well as provide an update on what has been accomplished since he took office in January.

White House Chief of Staff Rahm Emanuel told The New York Times Obama intends to use the news conference as a “six-month report card,” to talk about “how we rescued the economy from the worst recession” and the legislative agenda moving forward, including health care and energy legislation.

“My point is the area is down less than 20%.When other states are down 50%”

yome,

Is this the new rallying cry of the bulls? Do you know what us bears were called back in 2005 when we called for a future implosion of prices?

Hey, you could own 500K worth of company A stock while your friend owns the same amount of company B. Your friend is down 50%, 250K. You are down 20%, 100K. I would imagine that this would be the cause of celebration. You may be doing cartwheels down the NJTP, since you are only down 100K.

only 10%??? CRE hasnt even hit yet and with us having a consumer economy what happens when all of these businesses start to go under? more people lose jobs, leading to more foreclosure leading to less consumer spending leading to more businesses going under. its a self re-enforcing cycle

Recsssion still on and seep, Nj unemployment at sated 9.2% Natl stated unemployment rate now predicted to be 11% early 2010,8 billion budget shortfall fo NJ next year.

Credit card charge offs rising, and commercial real estate imploding,and on and on. How can anyone be talking about housing possibly bottoming out? Not even close.30% decline or more in our area is a done deal.

If Ben Bernanke was roasting your turkey on Thanksgiving, he’d dry it out by keeping it the oven too long. Newsflash Ben…you forgot about carryover…you can’t stop inflation when you already jacked up the money supply.